Bitcoin Drops 22% Amid Record ETF Outflows, Macro Forces Dominate

The crypto market is currently at a pivotal point. While Bitcoin (BTC) showed signs of stabilization around $77,000 about 10 days ago, it is now experiencing high correlation with US markets, which have been declining following the recent Federal Open Market Committee (FOMC) meeting. Both Bitcoin and Ethereum have seen a stabilization in ETF flows alongside declining volatility, allowing macroeconomic forces to take center stage.

The past month witnessed record ETF outflows, coinciding with a 22% dip in the BTC price. According to Nick at Ecoinometrics, significant ETF inflow or outflow cycles have historically correlated with major price swings. For instance, the initial ETF launch drove BTC from $40,000 to $70,000, a second wave of inflows in late 2024 pushed BTC to $110,000, and the recent outflow wave aligned with BTC’s 22% correction. Now, with ETF flows leveling out, there is potential for a new accumulation phase if inflows return. Ecoinometrics suggests that if flows turn positive in the coming weeks, it could mark the beginning of a new accumulation phase by professional investors.

Historically, Bitcoin halvings were the dominant narrative shaping price action. However, the current cycle is breaking from precedent. Bitcoin is well below its historical post-halving growth trajectories, suggesting that supply-side factors are no longer the primary driver of price. Instead, institutional flows and macroeconomic conditions are playing a far greater role. Ethereum, on the other hand, has a price that correlates more with sentiment, while Solana’s price is driven by mindshare, based on Kaito sentiment data. For Solana, changes in mindshare can explain up to 36% of price variance, and using a more sophisticated model, this jumps to 46%. For Ethereum, the most significant statistical predictor is sentiment, not mindshare, with a causality test showing that sentiment can help predict future ETH price action. In other words, Ethereum’s price is more sensitive to narrative shifts.

Uncertainty remains in the market. The Federal Reserve maintained its rate projections, giving risk assets a temporary reprieve, but not enough to reverse the crypto market’s downward momentum from the late-February breakdown below the 91,000 range. Inflation risks remain, even as Fed Chair Powell revived the infamous “transitory” adjective to describe policymakers’ expectations when confronting tariff-induced inflation. The Fed has slowed measures of quantitative tightening, but that shouldn’t be mistaken for quantitative easing. Any shift in the stance toward a more hawkish outlook could hit crypto liquidity.

The bottom line is, after an anemic bounce attempt, BTC looks headed to chop around its 200-day moving average a bit longer before picking a direction and dragging the rest of the crypto market with it. Institutional flows may take a front seat going forward as macro conditions dictate risk appetite. One bright spot in the news is that sentiment at traditional financial institutions is much better than what we see in the crypto-native trenches — an unusual dichotomy. That’s due to the many real improvements on the regulatory front, which may bode well for the future mainstreaming of DeFi protocols generally.